Environmental Degradation

In the current economic system, population growth almost inevitably results in more pollution of the environment. Companies can expect governments to tighten regulations to mitigate this effect. This page provides a brief overview of the most significant types of environmental degradation, and the industries most affected by each.

Air PollutionHuman activities result in emissions of aerosols and particulate matter into the atmosphere. These substances can cause harm or discomfort to humans and ecosystems. Outside air quality is mainly impacted by sulphur dioxide, nitrogen dioxide, carbon monoxide, methane, volatile organic compounds and fine particles. Some of these substances can react with sunlight to form ozone, which in turn contributes to smog forming. Sources of emissions include coal burning in power stations, internal combustion engines (cars & trucks), and agriculture, especially livestock.

Indoor air quality can be even worse than outside, especially in developing countries, where around 3 billion people cook and heat their homes using open fires and stoves. Perhaps surprisingly, the relatively clean indoor environment in developed countries can also be a source of air pollution, e.g. due to the release of chemicals by walls and furniture.

Biodiversity LossBiodiversity is the degree of variation of life forms in a given ecosystem, and seen as an indicator of the health of ecosystems. Biodiversity supports valuable ecosystem services such as air quality, water purification, pollination, and resources for food and medicines, and needs to be maintained to ensure the continuity of these services, which are also of great value to companies.

We know from the fossil record that five great extinctions took place in the past, due to catastrophic events such as asteroid impacts. The present time has been described as the sixth mass extinction, with human activities as the driving force. The main causes of biodiversity loss include habitat destruction, introduced and invasive species, and overexploitation. Climate change is expected to further raise the rate of extinction, because many species will not be able to adapt fast enough to increasing temperatures. According to some estimates, 40-70% of all species could become extinct by the end of the century.

Chemical PollutionHumans have mastered the ability to create substances that do not occur naturally in the environment. Some of these cannot be biologically decomposed, and therefore tend to accumulate in the atmosphere, soil or waterways and oceans. Chemical substances are used in a wide range of products, including pesticides, pharmaceuticals, household products, cosmetics, and in all sorts of plastic materials. Chemicals can enter the environment through direct application (e.g. pesticides), as a result of production processes, but also by leaching from finished products.

Over 80,000 chemicals are sold commercially, and thousands of new substances are created every year. Some of these compounds are suspected to be carcinogenic or endocrine disruptors, i.e. interfering with the hormone system in animals and humans, leading to birth defects and development disorders.

The EU is stepping up regulation of chemicals, and consumer associations and NGOs are increasingly urging manufacturers to reduce or ban the use of various chemicals, such as bisphenol-A and phthalates.

Industries most affected: manufacturers of chemicals, and companies using plastics and chemical ingredients, which includes almost all suppliers of physical goods.

DeforestationAccording to the FAO, around 13 million hectares of forest were lost each year in the last decade. Due to re- and afforestation efforts, the net annual loss amounts to around 5.2 million hectares per year, roughly equal to the size of Costa Rica. FAO statistics suggest that the rate of deforestation is declining, but this is contested by critics, who point to the fact that illegal logging is not reflected in the numbers. In any case, deforestation remains one of the most pressing environmental problems.

One of the causes of deforestation is wood removal for fuel. An estimated 3 billion people rely on wood for heating and cooking. However, the main driver of deforestation is conversion of land for agriculture, followed by logging. The growing population and increasing demand for meat lead to more demand for food and animal fodder, e.g. in the form of soy beans, which in turn leads to higher farmland requirements. An additional driver is the growing demand for biofuels.

Deforestation represents up to 20% of global CO2 emissions, thus contributing strongly to climate change. Other consequences include disruption of the water cycle leading to a drier climate, loss of soil through erosion, and biodiversity loss.

Nutrient PollutionEvery living cell needs nitrogen. Nitrogen is absorbed from the soil by plants, and passed on to humans and animals through consumption of fruit and vegetables. Nitrogen is quite abundant in the atmosphere in the form of N2, but used to be relatively scarce in the soil until the invention of artificial nitrogen fixation for use in fertilizers. Today, global production of artificial fertilizers (based on nitrogen, phosphorus and potash) of around 230 million tons per year substantially extends the production capacity of the world’s croplands, and is thus essential for feeding the global population.

There are drawbacks, however. Only a third of the nutrients end up in plants, and the remainder runs off into waterways and ultimately river deltas, where they lead to 'eutrophication': algal blooms resulting in large, oxygen deprived 'dead zones'. The best known dead zone is in the Gulf of Mexico, where the Mississippi river dumps large amounts of excess nutrients. Some of the nitrogen ends up the atmosphere in the form of N2O, a potent greenhouse gas.

Artificial fertilizers are indispensable, but need to be used much more efficiently to reduce the negative impacts.

Industries most affected: agriculture companies that apply artificial fertilizers, and their B2B customers, e.g. in food and clothing industries.

Ocean AcidificationAround a third of human generated carbon emissions released since the start of the Industrial Revolution have been absorbed by the oceans. This has helped to contain the warming of the atmosphere, which is good news. The bad news, however, is that CO2 reacts with water to form an acidic solution called carbonic acid. In the past two centuries, the oceans have become around 30% more acidic, and acidification is continuing, exactly in line with the increase of the atmospheric CO2 concentration. Ocean acidification has been referred to as ‘the other CO2 problem’.

A more acidic ocean hampers the ability of calcifying marine organisms to form corals and shells. The consequences are potentially far-reaching, since species at the base of the food chain, such as plankton and algae, may be adversely affected.

Industries most affected: fisheries and CO2-intensive industries, e.g. in energy production

Ozone Layer DepletionGases containing chlorine (especially CFCs) and bromine were invented in the 1920s and widely used in air conditioning, aerosol spray propellants, and certain industrial processes. In the 1970s, scientists discovered that these gases break down ozone in the stratosphere. Decades of CFC emissions have depleted the ozone layer, and created a hole in the ozone layer over polar regions in springtime, commonly known as the ozone hole. Stratospheric ozone absorbs UV rays, and thus acts as a shield against harmful radiation from the sun. The discovery of the ozone hole in 1984 led to the adoption of the Montreal Protocol in 1987, and global production of CFCs and related gases have since been reduced by 90%. However, it can take more than 50 years for the ozone layer to fully recover.

Because the Montreal gases also have a strong greenhouse effect, the phase-out of these gases has helped to contain global warming, a positive side effect. But the perfect solution has not yet been found, since CFCs have largely been replaced by HFCs, which are also greenhouse gases, albeit less powerful.

Industries most affected: industries still emitting CFCs in developing countries, and industries using HFCs, in refrigeration (e.g. food wholesale & retail) and air conditioning (e.g. in buildings and automobiles).

Companies should be aware of the various ways their products contribute to degradation of the environment, across the entire value chain, and try to reduce the negative impact, in order to mitigate regulatory risks, and enhance long term competitiveness.